One day after a powerful, short-squeeze driven rally in US Treasurys, as a flight to safety pushed investors out of tumbling stocks and into the "safety" of bonds on Thursday, Friday has seen a dramatic U-turn, with the 10Y yield surging from a low of 2.54% to as high as 2.6712%...
... a 4.2% increase, which was the biggest one-day percentage gain in the 10Y yield in two years, or since a 4.5% jump in the 10Y yield on January 18, 2017.
The recent sharp moves in the Treasury complex have sent the MOVE Treasury volatility index, which hit an all time low on October 1 to the highest level since the February flash crash.
What is remarkable about today's TSY selloff is how coordinated it has been across the entire curve, which shifted almost entirely in parallel, with 2 year yields similarly rising the most in over a year as the market's fascination with imminent rate cuts was put on the backburner.
The rebound in yields has pushed all tenors from 2Y to 5Y back above the 2.40 effective Fed Funds rate, a level all three TSY dipped below during yesterday's violent rally. This comes as bats on a rate cut in 2019 have faded modestly despite today's somewhat dovish comments by Powell which contrasted with the strong payrolls report.
Ironically, the violent reversal comes just days after investors plowed a near record $1.7 billion into the IEF iShares 7-10 Year Treasury bond ETF...
... and comes at a time of record government bond inflows.